Frequently Asked Questions

Foreign Exchange Facilities for Residents (As on June 30, 2004)

Introduction

The legal framework for administration of exchange control in India is provided by the Foreign Exchange Management Act, 1999. Under the Act, freedom has been granted for buying and selling of foreign exchange for undertaking current account transactions. However, the Central Government has been vested with powers in consultation with Reserve Bank to impose reasonable restrictions on current account transactions. Accordingly, the Government has issued Notifications GSR.381(E) dated May 3, 2000, and S.O. 301(E) dated March30, 2001, imposing certain restrictions on current account transactions in public interest.

These details are available on the Bank’s website besides with the authorised dealers and regional offices of the Exchange control Department. Our experience so far has been that the residents like to get information on several matters relating to various current account transactions and other incidental issues. This pamphlet contains answers to all such questions in simple language. While preparing replies to questions, special care has been taken to ensure that the replies are drafted in simple words and reference to technical details are avoided.

The Foreign Exchange Management Act,1999 (FEMA), has come into force with effect from June 1, 2000. With introduction of the new Act (in place of FERA) certain structural changes have been introduced and now all transactions involving foreign exchange have been classified either as Capital or Current Account transactions. All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. In terms of Section 5 of the FEMA, persons are free to buy or sell foreign exchange for any current account transaction except for those transactions on which Central Government has imposed restrictions, vide its Notification No.G.S.R.381(E) dated May 3, 2000 (as amended from time to time). Full text of the said Notification is available in the Official Gazette. Incidentally, no release of foreign exchange is admissible for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.

Some of the commonly or frequently asked questions by residents in connection with foreign exchange facilities or restrictions have been answered in following paragraphs.

1. How much exchange is available for a business trip?

Authorised dealers can release foreign exchange up to US$25,000 for a business trip to any country other than Nepal and Bhutan. Release of foreign exchange exceeding US$25,000 for a travel abroad (other than Nepal and Bhutan) for business purposes, irrespective of period of stay, requires prior permission from Reserve Bank. Visits in connection with attending of an international conference, seminar, specialised training, study tour, apprentice training, etc., are treated as business visits. Visit abroad for medical treatment and/or check up also falls within this category.

A person visiting abroad for medical treatment can also obtain foreign exchange upto the amount recommended by the doctor or hospital abroad for his treatment. This exchange is to meet the expenses involved in treatment and in addition to the amount referred to in paragraph 1 above.

3. How much exchange is available for studies outside India?

Release of foreign exchange for studies abroad up to the estimate given by an institution abroad or US$30,000 per academic year, whichever is higher, does not require prior permission from the Reserve Bank.

4. How much foreign exchange can one buy when going for tourism to a country outside India?

In connection with private visits abroad, viz., for tourism purposes, etc., foreign exchange up to US$10,000, in any one calendar year may be obtained from an authorised dealer. The ceiling of US$10,000 is applicable in aggregate and foreign exchange may be obtained for one or more than one visits provided the aggregate foreign exchange availed of in one calendar year does not exceed the prescribed ceiling of US$10,000 {The facility was earlier called B.T.Q or F.T.S.}. This US$10,000 (BTQ) can be availed of by a person alongwith foreign exchange for travel abroad for any purpose, including for employment or immigration or studies. However, no foreign exchange is available for visit to Nepal and/or Bhutan for any purpose.

5. How much foreign exchange is available to a person going abroad on employment?

6. How much foreign exchange is available to a person going abroad on immigration?

Person going abroad for immigration can draw foreign exchange upto US$ 5,000 or the amount prescribed by the country of emigration from an authorised dealer in India. These amount is only to meet the incidental expenses in the country of migration. No amount of foreign exchange can be remitted outside India to become eligible or for earning points or credits for immigration. All such remittances require prior permission of the Reserve Bank.

7. Is there any purpose for which going abroad requires prior approval from the Reserve Bank or Govt. of India?

Dance troupes, artistes, etc., who wish to undertake cultural tours abroad, should obtain prior approval from the Ministry of Human Resources Development, Government of India, New Delhi.

8. From where one can buy foreign exchange?

Foreign exchange can be purchased from any authorised dealer. Besides authorised dealers, full-fledged money changers are also permitted to release exchange for business and private visits.

9. How much foreign exchange can be purchased in foreign currency notes while buying exchange for travel abroad?

Travellers are allowed to purchase foreign currency notes/coins only up to US$ 2000. Balance amount can be taken in the form of traveller’s cheque or banker’s draft. Exceptions to this are (a) travellers proceeding to Iraq and Libya can draw foreign exchange in the form of foreign currency notes and coins not exceeding US$ 5000 or its equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States can draw entire foreign exchange released in form of foreign currency notes or coins.

10. Do same Rules apply to persons going for studies abroad?

For the purpose of studies abroad, exchange for maintenance expenses is released in the form of (i) currency notes up to US$ 2,000, (ii) the balance foreign exchange may be taken in form of traveller’s cheques or bank draft payable overseas.

11. How much in advance one can buy foreign exchange for travel abroad?

The foreign exchange acquired for any purpose has to be used within 60 days of purchase. In case it is not possible to use the foreign exchange within the period of 60 days it should be surrendered to an authorised dealer.

12. Can one pay by cash full rupee equivalent of foreign exchange being purchased for travel abroad ?

Foreign exchange for travel abroad can be purchased from banks against rupee payment in cash up to Rs.50,000/-. However, if the rupee equivalent exceeds Rs.50,000/-, the entire payment should be made by way of a crossed cheque/banker’s cheque/pay order/demand draft only.

13. Within what period a traveller who has returned to India is required to surrender foreign exchange?

On return from a foreign trip travellers are required to surrender unspent foreign exchange held in the form of currency notes within 90days and travellers’ cheques within 180 days of return. However, they are free to retain foreign exchange upto US$2,000, in form of foreign currency notes or TCs for future use.

14. On return to India can one retain some foreign exchange?

Residents are permitted to hold foreign currency up to US$2,000 or its equivalent provided the foreign exchange was -

acquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India;

or

acquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation,

or

acquired by him by way of honorarium or gift while on a visit to any place outside India;

or

acquired by him from an authorised person for travel abroad and represents the unspent amount thereof.

15. Is one required to surrender foreign coins also to an authorised dealer?

There is no restriction on residents holding foreign coins.

16

. How much foreign exchange can one send as gift / donation to a person resident outside India?

Any person resident in India can remit upto US$5,000 in any one year as a gift to a person residing outside India or as donation to a charitable/educational / religious /cultural organisation outside India. Remittances exceeding the limit require prior permission from the Reserve Bank.

17.

Is one permitted to use International Credit Card (ICC) for undertaking foreign exchange transactions?

Use of the International Credit Cards (ICCs) / ATMs/ Debit Cards can be made for making personal payments like subscription to foreign journals, internet subscription, etc., and for travel abroad in connection with various purposes only to the extent of the limits specified above. However, the cards can be freely used in India. Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not permitted.

18. While coming into India how much Indian currency can be brought in?

A person coming in to India from abroad can bring in with him Indian currency notes within the limits given below:

a.upto Rs. 5,000 from any country other than Nepal or Bhutan, and

b.any amount in denomination not exceeding Rs.100 from Nepal or Bhutan.

19.

While going abroad how much Indian currency can be taken out?

A person going out of India can take out with him Indian currency notes within the limits given below:

a.upto Rs.5000 to any country other than Nepal or Bhutan, and

b.any amount in denomination not exceeding Rs.100 to Nepal or Bhutan.

20.

While coming into India how much foreign exchange can be brought in?

A person coming into India from abroad can bring with him foreign exchange without any limit provided if foreign currency notes, or travellers cheques exceed US$ 10,000/- or its equivalent and/or the value of foreign currency exceeds US$ 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

21.

While going abroad how much foreign exchange can a person carry?

Residents are free to carry the foreign exchange purchased from an authorised dealer or money changer in accordance with the Rules. In addition, they can also carry up to US$ 2,000, if already held by them (see item13 above) in accordance with the Regulations.

22.

Is one required to follow complete export procedure when a gift parcel is sent outside India?

A person resident in India is free to send (export) any gift article of value not exceeding Rs. 1,00,000 provided export of that item is not prohibited under the extant EXIM Policy.

23.

How much jewellery one can carry while going abroad?

Taking personal jewellery out of India is governed by Baggage Rules framed under Export-Import Policy by the Government of India.

24.

Can a resident open a foreign currency denominated account in India?

Persons resident in India are permitted to maintain foreign currency accounts in India under following two Schemes:

EEFC Accounts –

To avoid exchange loss on conversion of foreign exchange into Indian Rupee & Rupee into foreign exchange, residents can retain upto 50% of foreign currency remittances received from abroad in a foreign currency account, viz., EEFC account, with an authorised dealer in India . Funds held in EEFC account can be utilised for current account transactions and also for approved capital account transactions as specified by the extant Rules/Regulations/Notifications/Directives issued by the Government/RBI from time to time.

RFC Accounts :-

Returning Indians, i.e., those Indians, who were non-residents earlier, and are returning now for permanent stay, are permitted to open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to keep their foreign currency assets. Assets held outside India at the time of return can be credited to such accounts. The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India. The facility is also available to residents provided foreign exchange to be credited to such account is received out of certain specified type of funds/accounts.

25.

Can a person resident in India hold assets outside India?

In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.

General Information

For further details/guidance, please approach any bank authorised to deal in foreign exchange or contact Regional Offices of the Exchange Control Department of the Reserve Bank.

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